Freeport shares drop after quarterly profit misses expectations

(Reuters) - Freeport-McMoRan Inc, the world’s largest publicly traded copper producer, posted a lower-than-expected quarterly profit on Thursday due to slipping production and rising costs, sending shares down more than 8 percent.

Freeport is in the midst of carrying out a $15 billion project to expand Indonesia’s massive Grasberg copper and gold mine from an open pit to an underground operation, a complex and time-intensive process that is nevertheless essential to help Freeport stem an erosion in production.

Freeport said its costs would likely rise to $1.75 per pound of copper this year, the second consecutive forecast increase since January, surprising investors. The price Freeport receives for its copper fell 7 percent to $2.90 per pound in the quarter.

Copper production fell 18 percent in the quarter to 750 million pounds, more than many analysts expected, with the largest drop in Indonesia.

Shares of the company fell 8 percent to $12.49 in afternoon trading after the earnings miss. Broader markets were mixed.

The stock had gained about 35 percent since January, outpacing copper prices.

Freeport Chief Executive Richard Adkerson said in an interview earlier this month that the Grasberg expansion will be the company’s main focus for the next two years and that Freeport will forgo any dividend raises or large-scale acquisitions in the interim.

The expansion will, Adkerson hopes, mark a pivot to massive growth for the company just as copper demand surges for use in electric cars and other electronics. But the growth comes at a high cost and is testing the patience of Wall Street, where investors often look for quicker paybacks on investment projects.

The Phoenix-based company posted first quarter net income of $31 million, or 2 cents per share, compared with net income of $692 million, or 48 cents per share, in the year-ago quarter.

Excluding onetime items, Freeport earned 5 cents per share. By that measure, analysts expected earnings of 7 cents per share, according to IBES data from Refinitiv.

Grasberg is also a major gold producer and output of gold and molybdenum also slipped during the quarter.

Freeport agreed last December to relinquish majority control of Grasberg under pressure from the Indonesian government, although it will remain the project’s operator.